Rs330m approved for maintenance of aircraft

ISLAMABAD: While granting its nod for laying off 25 percent workforce or around 3,500 through Voluntary Separation Scheme (VSS), the Economic Coordination Committee (ECC) of the cabinet Wednesday approved restructuring plan of Rs457 billion for cash-bleeding Pakistan International Airlines (PIA).

The meeting approved Rs330 million for the Ministry of Defence for the maintenance of aircraft. This restructuring plan for PIA will be implemented after getting approval from the federal cabinet. The ECC directed the authorities concerned to further fine tune the restructuring plan and reconcile figures before presenting before the cabinet.

The PIA required Rs13 billion from the government for implementing VSS in order to lay off around 25 percent of a total workforce of 14,000, indicating that around 3,500 working staff will be relieved under the restructuring plan. When contacted, Adviser to PM on Institutional Reforms Dr Ishrat Hussain said the PIA restructuring plan would convert the whole amount of loan of Rs457 billion into equity as books adjustments would be done in staggered manner to clean the balance sheet of PIA. He said that PIA balance sheet was negative so it requires restructuring plan on immediate basis.

He said that there would be no cash injections, but the loans and liabilities would be converted into equity in staggered manner and PIA would be restructured. He said that there were many other government institutions where loans were converted into equity so same would be done with the PIA to make the national flag carrier run in an efficient manner. The ECC which held its meeting under the chairmanship of Minister for Finance and Revenue Hammad Azhar was informed on Wednesday through submitted summary from Civil Aviation Authority (CAA) that total losses of PIA ballooned to Rs457 billion as on 30-09-2020 including GoP-guaranteed loans of Rs201.8 billion, loans from GoP Rs55.6 billion, loans on PIA balance sheet Rs53 billion and mark-up on loans Rs16 billion so in totality the loans and mark-up peaked to Rs326.4 billion.

The PIA balance sheet further disclosed that payables to PSO stood at Rs16.4 billion, to CAA Rs86.7 billion, outstanding tax liabilities Rs14.7 billion, so in totality the payables to different government institutions stood at Rs117.8 billion. In totality, the losses of PIA stood at Rs457 billion. Now the ECC approved that the GoP-guaranteed loan of Rs201.8 billion will be converted into equity as this outstanding amount will be repaid as per amortisation schedule from fiscal year 2020-21 to 2026-27.

The outstanding loans from GoP to the tune of Rs55.6 billion will be settled as book entry and loans on PIA balance sheet of Rs52.9 billion will be repaid as amortisation schedule. The payables to government institutions to the tune of Rs117.8 billion will be settled subject to agreement among CAA, PSO and FBR to waive off as receivables. The VSS amount of Rs12.9 billion has already been approved by the government.

The ECC has been further told that the PIA assets stood at Rs147.5 billion while its liabilities ballooned to Rs457 billion demonstrating financial health of the national flag carrier heading towards complete disaster. The current assets of PIA stood at Rs53.2 billion. The goods retained in shape of total property, plant and equipment has been estimated at Rs82.6 billion and total non-current assets of PIA stood at Rs88.9 billion. Other assets including stores and spares to the tune of Rs2.4 billion, trade debts Rs14.8 billion, advances Rs1.6 billion, trade deposits Rs2.5 billion, short term receivables Rs8.8 billion, cash and bank balance Rs8.6 billion and VSS cash payment Rs12.9 billion.

According to a statement issued by Finance Ministry after the ECC, the Aviation Division submitted a summary before the ECC regarding restructuring plan of the Pakistan International Airlines Corporation Ltd (PIACL). The adviser to the PM on institutional reforms and austerity made a detailed presentation on human resource and operational restructuring of the PIACL. He drew attention to the various options for restructuring and outlined measures to minimise losses and transform PIACL into a financially viable entity. It included human resource restructuring through VSS, hiring aviation experts, fleet modernisation, routes rationalisation, product development and revenue enhancement measures.

After detailed consultation, the ECC recommended the restructuring plan of PIACL for onward submission before the cabinet, after reconciliation of tax liability figures, with a direction to place a cap on future debt which PIACL could take against its improved balance sheet, once restructuring plan is implemented, the statement concluded.